Tag Archives: chicago board of trade

On Thursday evening at the Roxie Theatre in San Francisco, the professional women’s organization 100 Women in Hedge Funds sponsored the showing of Floored, a documentary by ex-floor trader James Allen Smith that offers a peek inside the lives, successes, and struggles of former traders of the Chicago trading floor (a.k.a. the “pit”).

Those who showed up to watch the film made for the perfect audience–traders, hedge fund managers, and other financial industry professionals schmoozed over wine and cheese before the showing, during which boos, laughter, applause, and verbal comments erupted each time the audience could relate to traders’ stories or make fun of their often idiosyncratic comments. Upon leaving trading, one notable former trader (and quite the character) Mike Walsh took up the hobby of hunting lions, giraffes, and other wild animals.

Through interviews and live footage of pit trading, the documentary tells the story of the Chicago Board of Trade’s (now the Chicago Mercantile Exchange, CME) humble beginnings–it opened in 1898 as the Chicago Butter and Egg Board because it only traded butter and egg contracts!–to the roller coaster ride experienced by floor traders during the peak of futures and options floor trading in the mid-1990s.

Starting in 1992 and still in use today in the pit is the combination of open outcry, the system of loudly shouting over competitors often associated with floor trading, and GLOBEX, an electronic trading system which works alongside open outcry to make trading more efficient. The idea behind trading revolves around buying a commodity at one price and then trying to sell it for a better price in order to make a profit. In the film, the traders described this system as a game–one trader stated that when the bell goes off (to initiate the opening of trading hours), he experiences an adrenaline rush as if he were playing a sports game. Another trader commented, “Trading is not a normal job. When you are in there [the pit] from 8:30 to 3:15, it’s all about money!”

The main issue traders discussed was the shift from floor trading to electronic trading. The majority opinion was that computers changed the dynamic of trading in an unfavorable way and that trading in person helps make the price of commodities more efficient. One trader commented that open outcry was more “honorable”. There is also a generational issue, as older traders who did not grow up using computers had trouble figuring out complicated electronic trading platforms. Essentially, those traders who still had enough money to continue trading and who were able to use the electronic systems continued trading, while those who lost too much money in the pit were forced to leave trading altogether.

According to the CME, the options and futures trading floor remains grounded in floor trading, which accounts for 90% of trades with the remaining 10% occurring electronically. The futures pit, however, has seen the biggest crossover to electronic trading, with approximately 85% of trades taking place on the computer and the remaining ones in the pit.

After the film, Smith, who watched the film alongside his audience, stood at the front of the theatre for a Q&A session. He was asked about his background–he went to art school then found himself doing web design for finance businesses in Chicago, where a friend suggested he make a movie about floor traders. He even dabbled in trading and reached out to his network when casting traders for the film. When asked why former traders were willing to open up about their personal lives on film, he commented that less successful traders are often more likely to talk, while more successful traders remain tighter-lipped. Finally, when asked what impression of traders he wanted to leave with audiences, Smith replied that traders are usually stereotyped as “greedy a**holes”, and he wanted to show that traders are more “dynamic than just that part of their personalities” by offering a “more rounded impression [of traders]” through his film.